9 ms·

Better Than Raising the Minimum Wage: Expand the Earned Income Tax Credit

31 points by snowy 11y ago

dpweb 11y ago
Partially true, but ignores the fact the economy and one's rewards from it, is a game. Your success is largely based on your talent in playing, and some will inevitably do better than others. But, that game also has rules that bias those already advantaged. Politicians are the public face of this, and people realize that those who make the laws can be bought by powerful interests - they know - but believe they can't do anyting about it. There is some unfair hatred of rich and the elite - that does exist - but there is also a resentment that comes from the realization that the promise of the "American dream" and the level playing field is not exactly that. That's not a concern to be waived away in the press by the world's richest men, but directly addressed which will be difficult, because you have to acknowledge the problem of the bias (not level field) while simultaneously trying to get rid of the victim mentality which also plays a factor with those who are losing.
NPMaxwell 11y ago
Is there a reason why a $15/hour minimum wage would not function something like a helicopter money drop (http://www.economicshelp.org/blog/5937/economics/helicopter-money-drop/ http://www.economicshelp.org/blog/5937/economics/helicopter-...) and be helpful in times of low inflation (e.g., now)?
- CyberDildonics 11y ago
  So to be clear, you think paying the people who make the least more money is the same as dropping money from a helicopter?
  - briandh 11y ago
    If my understanding of the term is correct, NPMaxwell's comparison to a helicopter drop is a poor one. However, not only is it an established term of art, but he/she provided a reference for background. The glibness of your response is entirely unwarranted.
  - NPMaxwell 11y ago
    Actually, yes. Like a helicopter drop, a minimum wage increase shifts money from those who would save it to those who have the greatest incentive to spend it quickly. As noted in the earlier comments, what I was missing was that a helicopter drop is done by printing money, rather than shifting it from others. An EITX is closer to a helicopter drop, and I'm starting to see part of why it's a better idea.
- federicobond 11y ago
  I recommend you read some of the articles that the economist Donald Boudreaux has written on this topic. Most of them are short and well written. http://cafehayek.com/?s=reich http://cafehayek.com/?s=reich
- deleted 11y ago
  [deleted]
- Symmetry 11y ago
  If you do a "helicopter drop" the money is created by the central bank out of thin air which is basically why it tends to increase aggregate demand. There's more money but prices don't adjust instantly so more stuff gets bought. Raising the minimum wage does the opposite. Hiring workers becomes more expensive and 70% of that increase in prices is empirically passed on to consumers in the form of higher prices. So now the money to price ratio goes down and aggregate demand decreases. Your plan was tried in the Great Depression and it backfired spectacularly.
  - Eridrus 11y ago
    > 70% of that increase in prices is empirically passed on to consumers in the form of higher prices This depends entirely on the price elasticity of demand.
    - Symmetry 11y ago
      Yes but I don't think we have any reason to expect major changes in that. And if that were to change then I'd expect us to see minimum wage hikes to start causing unemployment.
emp_zealoth 11y ago
Right, because Soros, that paid less than 1000 Euro of tax last year and is due anywhere from 7 BILLION to 14 BILLION is obviously a valuable part of community and clearly deserving the tax break. SARCASM.
graycat 11y ago
There are rich people and there are powerful people, and there is a lot of overlap between the two. Some of the rich people sometimes do relatively a lot to help the poor people. E.g., there are Bill and Melinda Gates, and they also got Warren Buffett to allocate nearly all of his fortune. And little Melinda, sweetheart, got lots of other rich people to sign up for her 50% or so 'giving pledge' http://givingpledge.org/ http://givingpledge.org/ Net, apparently Melinda has, via Bill, Warren, and others, moved well over $100 billion into philanthropy. Andrew Carnegie? Lots of libraries, especially good for poor people. Andrew Mellon? The US National Gallery of Art -- free for everyone. Michael Bloomberg -- $1+ billion to The Johns Hopkins University, especially to its medical school for progress in medicine that helps lots of people, including poor people. And we could construct a much longer list. From all I can tell, if the poor people have a valid gripe, then it is with some of the power of the powerful people and not much with the money of the rich people, and here is why: Shockingly, in simple terms, for the most direct purposes of the poor people, the rich people don't have much money! Sure, each of the 1000 richest people could buy a new Ferrari for themselves, but they definitely can't buy a new Ferrari for each poor person -- even if Ferrari could make that many cars. Or let's consider 'wealth redistribution' and do a little arithmetic: Let's look a little at the wealthiest people in the US; for some data, let's look, say, at the 2014 Forbes 400 as at http://www.forbes.com/forbes-400/ http://www.forbes.com/forbes-400/ There we see that the 400 people on that list are worth in total $2.29 trillion. The least wealthy person on that list is worth $1.55 billion. Oh, let's be generous: Let's take the 1000 richest US citizens and assume that each of the 600 least wealthy are also each worth $1.55 billion. Then the total wealth of the 1000 wealthiest US citizens would be 2.29 * 10**12 + 600 * 1.55 * 10**9 = 3,220,000,000,000 dollars, that is, about 3.2 trillion dollars. Suppose we outright 'confiscate' and 'redistribute' all this wealth across all US citizens. So, from Google search "US population" we see that the US population in 2014 was 318.9 million people. If we were just to confiscate the full $3,220,000,000,000 and redistribute it among the 318.9 million people, then from the 'redistribution' each person would get 3,220,000,000,000 / ( 318.9 * 10**6 ) = 10,097.21 dollars, that is about 10 thousand dollars. So, that's what each person would get if we were to do a 'full redistribution' of the wealth of the 1000 wealthiest US citizens. So, right, $10,097.21 per person is not enough for a yacht, a house, a new car, or one year of college. And that $10,097.21 would be a one-time thing, not each year. So, where is the real 'wealth' for individuals in the US? Sure, just where it long has been: In (1) Social Security obligations, (2) the rest of the US 'social safety net', and (3) employee pension funds. So, if want US citizens, including the poorest, to be much richer, which is a terrific goal, then, rather than confiscate the wealth of the 1000 wealthiest, find a ways for more of the 318.9 million people to have good jobs. Just how to do that is more complicated than the simple arithmetic used here.
dang 11y ago
Url changed from http://www.independent.co.uk/news/people/warren-buffett-thinks-that-the-poor-need-to-stop-blaming-inequality-on-the-rich-10271780.html?icn=puff-1 http://www.independent.co.uk/news/people/warren-buffett-thin..., which points to this. Title changed from "Warren Buffett thinks the poor should stop blaming inequality on the rich".
sudioStudio64 11y ago
Raising minimum wage would stimulate consumption. Poor people spend their money. Rich people sit on theirs.
- monochromatic 11y ago
  Raising minimum wage increases unemployment.
  - fnordsensei 11y ago
    Source? I managed to find this site that'd done an analysis of past increases, and the results seem far from clear cut. https://cdn.americanprogress.org/wp-content/uploads/2013/12/minwageunemployment_tbl1.png https://cdn.americanprogress.org/wp-content/uploads/2013/12/...
    - Tarang 11y ago
      It comes from academic material, typical neoclassic economics textbooks teach this so I assume its from The Wealth of Nations. By increasing the minimum wage it locks out a portion of employees from being employed where the marginal product of labour is less than the minimum wage. Because of this there are actually tonnes of papers studying its effects: [1] http://www.nber.org/papers/w0846.pdf http://www.nber.org/papers/w0846.pdf (one such paper)
    - jjoonathan 11y ago
      Doucouliagos and Stanley published a great review in 2009 with the key figure being a scatterplot of study size vs elasticity (elasticity = change in # jobs / change in min wage) [1]. This looks like a funnel centered around the true value. The funnel is wide where N is small and narrow where N is large. Two conclusions from the figure: 1. The true elasticity is ~0 (maybe ever so slightly negative). Only small increases in minimum wage were studied, so this isn't an argument in favor of drastic raises, just an argument that small raises don't hurt under prevailing conditions. 2. The funnel should be symmetrical because random error does not favor higher vs lower elasticity. Instead, the funnel is bent, which is evidence of strong publication bias in favor of results of the form "increases in minimum wage decrease the number of jobs." FWIW I don't think minimum wage increases are a great way out of this mess because I think reduced workweek and basic income / minimum income / EITC are all better options. Still, I think this figure is pretty convincing evidence that economists place too much faith in their neoclassical model. [1] Page 33 of http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.398.2297&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.398... EDIT: added conclusion, fixed possibly misleading wording
heimatau 11y ago
I swear, most of this is PR. How about these mega rich people give their average worker a pay raise? Nope, even though that is within their power, they don't. But...instead they petition the public to do something not within their power. Come on. This is all PR. I wish all the mega rich would just DO something instead of these endless PR 'battles'.
- andrewflnr 11y ago
  In most companies currently offering minimum wage, raising wages to $15/hr without changing anything else would wreck the company immediately. They would likely have to do some combination of firing people who can't do $15/hr worth of work and raising prices and hope they still have a market after that. So no, it's not so easily "in their power". Further, a lot of companies aren't run by the "mega rich", but by regular people who are just trying to get by. These are not people you want to screw over.
  - lumberjack 11y ago
    >In most companies currently offering minimum wage, raising wages to $15/hr without changing anything else would wreck the company immediately. In 2015 and with some data from IRS one could estimate the actual and not just speculative impact of raising the minimum wage. One could know exactly how many jobs will be lost and one does not need to speculate any more. Once one knows the exact impact it's easy to make the decision of exactly what the optimal minimum wage should be. Also, you seem to be alluding to small enterprises paying minimum wage. I highly doubt that. Small shops can exist only if they are doing something that is highly specialized/technical as the big competitors devour the rest of the general market. As such their employees are highly skilled and don't get paid minimum wage.
  - heimatau 11y ago
    "So no, it's not so easily 'in their power'." Actually, it is. Not the utopia of minimum wage to 15hr. Let's do some quick numbers. 50 weeks a year, 35 hours a week. Equals 1,750 hours per year. Employers raise an employee pay by $1 an hour. Hmm. That's greater than most get from EITC. $3.5 an hour raise, and that's greater than ALL EITC recipients. Also, managers and top managers don't need their lofty salaries. That could change. Finally, I'd never propose an immediate change. There would be a lot of business structural change to rebuild the middle class. There are other ways to redistribute the money in a more fair way, than what is currently being done.
analog31 11y ago
In essence, the EITC rewards work and provides an incentive for workers to improve their skills. Equally important, it does not distort market forces, thereby maximizing employment. I wonder about this. In a perfect market system, it's impossible to pay below-subsistence wages, because you can't work if you've starved to death. I think Adam Smith pointed this out. So, any public support for wage earners distorts the market by driving wages downward. It's arguable that the government should subsidize wage earners, so that wages can be lower. Low wage earners receive a lot of things that they don't pay for out of their own pockets, such as education, which I support. But it should not be offered as a protection of the free market.
- monochromatic 11y ago
  > In a perfect market system, it's impossible to pay below-subsistence wages, because you can't work if you've starved to death. You might not starve to death if you start committing crimes on the side though.
  - analog31 11y ago
    True, and it raises an additional point, which is that an isolated consideration of economics generally overlooks the willingness of people to cooperate with the myriad of written and unwritten rules that govern civil society.
- lumberjack 11y ago
  >I wonder about this. In a perfect market system, it's impossible to pay below-subsistence wages, because you can't work if you've starved to death. Exactly. It's no hard to see how those who praise it so much get to immediately benefit from it by being able to hire people for wages that are ridiculously low and forcing the taxpayer to foot the bill for the rest.
- DalekBaldwin 11y ago
  Any non-market action will distort market forces. What he means is that the EITC is a softer kind of distortion. Since the EITC is essentially a matching contribution to the employee's earnings, it still allows decisions about wages to be made at the margin, as opposed to a minimum wage which mandates a hard cutoff.
waps 11y ago
It's funny how this article is located right below an article pointing out how Warren Buffet owns trailor park firms who advertise that they are raising rent on poor people at 10% per year. They can't leave, after all, the alternative is to be homeless. [1] > No conspiracy lies behind this depressing fact: The poor are most definitely not poor because the rich are rich. However, a lot of people are homeless because Warren Buffet wanted to be paid just a little more. [1] http://www.theguardian.com/lifeandstyle/2015/may/03/owning-trailer-parks-mobile-home-university-investment http://www.theguardian.com/lifeandstyle/2015/may/03/owning-t...
lumberjack 11y ago
Yeah, let's subsidize Walmart employees with tax payer money instead of letting the poor guys pay their employees themselves. It's not like they are billionaires or anything. What should rather happen is the exact opposite! If you work for Walmart you shouldn't be able to receive any government assistance at all because you are already working and the point of working 8 hours a day is to be able to feed and cloth yourself and if you cannot do that with that job then that job is of no use to you or anyone and should therefore stop existing. But if it turns out that the employer or whoever benefits from that job desperately needs it, they will have to pay the employees a livable wage. What should definitely not happen is that the tax payer ends up subsidizing privately owned businesses without getting anything in return. And if it doesn't sit well with anyone that people get money for nothing (which is the argument pushed for EITC) then let the government employ them to do something that is at least remotely useful to the taxpayer that is footing the bill. Even just sweeping leafs off porches is better use of money.
- Symmetry 11y ago
  If you give workers higher wages using the minimum wage most of the extra money they get comes from the place they work raising prices. Places that pay minimum wage, like Walmart, disproportionately have customers that aren't very well off themselves. Giving money from a household that earns $40k per year to one that earns $20k per year does make the country more equal but we can do better. The money that goes into the EITC comes from income taxes and the top 10% of household pay more than half of the US income tax. If we want to give money to working Americans we have to pay for it somehow. We can either do that explicitly and in a progressive fashion or we can hide the price from voters and let the burden fall repressively.
  - lumberjack 11y ago
    >If you give workers higher wages using the minimum wage most of the extra money they get comes from the place they work raising prices. Employers are bound by the market when they set their prices and don't get to choose their price at random on a whim. >The money that goes into the EITC comes from income taxes and the top 10% of household pay more than half of the US income tax. Yes but for the most part those are just the middle class. The plutocrats pay fuck all in taxes. I do not want an MD with a networth of $10M (sweat of his own brow) subsidizing a Walton (who inherited his fortune). I want the Walton to pay the actual cost of running his goddamn shop. Also frankly, I think minimum wage is besides the point. What should come back are strong sector wide unions like the ones that still exist in Scandinavia. The unions will take care to setup their own sector wide minimum wage and will be far more flexible in responding to the market and also the cost of living than the government can ever be.
PaulHoule 11y ago
Republicans like Means Testing because they know many people won't fill out the paperwork to get benefits and Congressional Democrats like it too because they are almost all lawyers and paperwork is the center of their universe. I don't like the idea of picking certain people as being "needier" than others because it is a moving target. For instance, you might say that families need it more because they are raising kids, but one of the most troubled segments of the population are poor young men; if these guys get on their feet they are going to be in a position to raise a family and do it right.
midnitewarrior 11y ago
Everybody complains that the poor don't pay taxes. If they raised the minimum wage, everybody else wouldn't be stuck paying the extra tax burden of the poor because they could pay it themselves. If any thing, we need to raise minimum wage and lower the Earned Income Tax Credit. The EITC was created by businesses lobbying the government to low wage earners a tax break in exchange for not raising the minimum wage. It has been disastrous to tax revenues and wages. Millions of Americans get to hear how they are not carrying their tax burden as well and then are attacked by the Republicans for living on government handouts.
- shit_parade2 11y ago
  This is a false narrative. The poor pay plenty in taxes and fees. Between sales tax, worker payroll, SS, medicare, and various mandated fees from health insurance to car insurance to additional transportation taxes and tolls, and a million other fees and restrictions, the poor stay poor in part because of perverse government requirements.
  - midnitewarrior 11y ago
    Sorry, let me clarify, income taxes. Poor don't pay their share of income taxes.

31 points by snowy 11y ago

dpweb 11y ago

Partially true, but ignores the fact the economy and one's rewards from it, is a game. Your success is largely based on your talent in playing, and some will inevitably do better than others. But, that game also has rules that bias those already advantaged. Politicians are the public face of this, and people realize that those who make the laws can be bought by powerful interests - they know - but believe they can't do anyting about it. There is some unfair hatred of rich and the elite - that does exist - but there is also a resentment that comes from the realization that the promise of the "American dream" and the level playing field is not exactly that. That's not a concern to be waived away in the press by the world's richest men, but directly addressed which will be difficult, because you have to acknowledge the problem of the bias (not level field) while simultaneously trying to get rid of the victim mentality which also plays a factor with those who are losing.

NPMaxwell 11y ago

Is there a reason why a $15/hour minimum wage would not function something like a helicopter money drop (http://www.economicshelp.org/blog/5937/economics/helicopter-money-drop/ http://www.economicshelp.org/blog/5937/economics/helicopter-...) and be helpful in times of low inflation (e.g., now)?

CyberDildonics 11y ago
So to be clear, you think paying the people who make the least more money is the same as dropping money from a helicopter?
- briandh 11y ago
  If my understanding of the term is correct, NPMaxwell's comparison to a helicopter drop is a poor one. However, not only is it an established term of art, but he/she provided a reference for background. The glibness of your response is entirely unwarranted.
- NPMaxwell 11y ago
  Actually, yes. Like a helicopter drop, a minimum wage increase shifts money from those who would save it to those who have the greatest incentive to spend it quickly. As noted in the earlier comments, what I was missing was that a helicopter drop is done by printing money, rather than shifting it from others. An EITX is closer to a helicopter drop, and I'm starting to see part of why it's a better idea.
federicobond 11y ago
I recommend you read some of the articles that the economist Donald Boudreaux has written on this topic. Most of them are short and well written. http://cafehayek.com/?s=reich http://cafehayek.com/?s=reich
deleted 11y ago
[deleted]
Symmetry 11y ago
If you do a "helicopter drop" the money is created by the central bank out of thin air which is basically why it tends to increase aggregate demand. There's more money but prices don't adjust instantly so more stuff gets bought. Raising the minimum wage does the opposite. Hiring workers becomes more expensive and 70% of that increase in prices is empirically passed on to consumers in the form of higher prices. So now the money to price ratio goes down and aggregate demand decreases. Your plan was tried in the Great Depression and it backfired spectacularly.
- Eridrus 11y ago
  > 70% of that increase in prices is empirically passed on to consumers in the form of higher prices This depends entirely on the price elasticity of demand.
  - Symmetry 11y ago
    Yes but I don't think we have any reason to expect major changes in that. And if that were to change then I'd expect us to see minimum wage hikes to start causing unemployment.

emp_zealoth 11y ago

Right, because Soros, that paid less than 1000 Euro of tax last year and is due anywhere from 7 BILLION to 14 BILLION is obviously a valuable part of community and clearly deserving the tax break. SARCASM.

graycat 11y ago

There are rich people and there are powerful people, and there is a lot of overlap between the two. Some of the rich people sometimes do relatively a lot to help the poor people. E.g., there are Bill and Melinda Gates, and they also got Warren Buffett to allocate nearly all of his fortune. And little Melinda, sweetheart, got lots of other rich people to sign up for her 50% or so 'giving pledge' http://givingpledge.org/ http://givingpledge.org/ Net, apparently Melinda has, via Bill, Warren, and others, moved well over $100 billion into philanthropy. Andrew Carnegie? Lots of libraries, especially good for poor people. Andrew Mellon? The US National Gallery of Art -- free for everyone. Michael Bloomberg -- $1+ billion to The Johns Hopkins University, especially to its medical school for progress in medicine that helps lots of people, including poor people. And we could construct a much longer list. From all I can tell, if the poor people have a valid gripe, then it is with some of the power of the powerful people and not much with the money of the rich people, and here is why: Shockingly, in simple terms, for the most direct purposes of the poor people, the rich people don't have much money! Sure, each of the 1000 richest people could buy a new Ferrari for themselves, but they definitely can't buy a new Ferrari for each poor person -- even if Ferrari could make that many cars. Or let's consider 'wealth redistribution' and do a little arithmetic: Let's look a little at the wealthiest people in the US; for some data, let's look, say, at the 2014 Forbes 400 as at http://www.forbes.com/forbes-400/ http://www.forbes.com/forbes-400/ There we see that the 400 people on that list are worth in total $2.29 trillion. The least wealthy person on that list is worth $1.55 billion. Oh, let's be generous: Let's take the 1000 richest US citizens and assume that each of the 600 least wealthy are also each worth $1.55 billion. Then the total wealth of the 1000 wealthiest US citizens would be 2.29 * 10**12 + 600 * 1.55 * 10**9 = 3,220,000,000,000 dollars, that is, about 3.2 trillion dollars. Suppose we outright 'confiscate' and 'redistribute' all this wealth across all US citizens. So, from Google search "US population" we see that the US population in 2014 was 318.9 million people. If we were just to confiscate the full $3,220,000,000,000 and redistribute it among the 318.9 million people, then from the 'redistribution' each person would get 3,220,000,000,000 / ( 318.9 * 10**6 ) = 10,097.21 dollars, that is about 10 thousand dollars. So, that's what each person would get if we were to do a 'full redistribution' of the wealth of the 1000 wealthiest US citizens. So, right, $10,097.21 per person is not enough for a yacht, a house, a new car, or one year of college. And that $10,097.21 would be a one-time thing, not each year. So, where is the real 'wealth' for individuals in the US? Sure, just where it long has been: In (1) Social Security obligations, (2) the rest of the US 'social safety net', and (3) employee pension funds. So, if want US citizens, including the poorest, to be much richer, which is a terrific goal, then, rather than confiscate the wealth of the 1000 wealthiest, find a ways for more of the 318.9 million people to have good jobs. Just how to do that is more complicated than the simple arithmetic used here.

dang 11y ago

Url changed from http://www.independent.co.uk/news/people/warren-buffett-thinks-that-the-poor-need-to-stop-blaming-inequality-on-the-rich-10271780.html?icn=puff-1 http://www.independent.co.uk/news/people/warren-buffett-thin..., which points to this. Title changed from "Warren Buffett thinks the poor should stop blaming inequality on the rich".

sudioStudio64 11y ago

Raising minimum wage would stimulate consumption. Poor people spend their money. Rich people sit on theirs.

monochromatic 11y ago
Raising minimum wage increases unemployment.
- fnordsensei 11y ago
  Source? I managed to find this site that'd done an analysis of past increases, and the results seem far from clear cut. https://cdn.americanprogress.org/wp-content/uploads/2013/12/minwageunemployment_tbl1.png https://cdn.americanprogress.org/wp-content/uploads/2013/12/...
  - Tarang 11y ago
    It comes from academic material, typical neoclassic economics textbooks teach this so I assume its from The Wealth of Nations. By increasing the minimum wage it locks out a portion of employees from being employed where the marginal product of labour is less than the minimum wage. Because of this there are actually tonnes of papers studying its effects: [1] http://www.nber.org/papers/w0846.pdf http://www.nber.org/papers/w0846.pdf (one such paper)
  - jjoonathan 11y ago
    Doucouliagos and Stanley published a great review in 2009 with the key figure being a scatterplot of study size vs elasticity (elasticity = change in # jobs / change in min wage) [1]. This looks like a funnel centered around the true value. The funnel is wide where N is small and narrow where N is large. Two conclusions from the figure: 1. The true elasticity is ~0 (maybe ever so slightly negative). Only small increases in minimum wage were studied, so this isn't an argument in favor of drastic raises, just an argument that small raises don't hurt under prevailing conditions. 2. The funnel should be symmetrical because random error does not favor higher vs lower elasticity. Instead, the funnel is bent, which is evidence of strong publication bias in favor of results of the form "increases in minimum wage decrease the number of jobs." FWIW I don't think minimum wage increases are a great way out of this mess because I think reduced workweek and basic income / minimum income / EITC are all better options. Still, I think this figure is pretty convincing evidence that economists place too much faith in their neoclassical model. [1] Page 33 of http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.398.2297&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.398... EDIT: added conclusion, fixed possibly misleading wording

heimatau 11y ago

I swear, most of this is PR. How about these mega rich people give their average worker a pay raise? Nope, even though that is within their power, they don't. But...instead they petition the public to do something not within their power. Come on. This is all PR. I wish all the mega rich would just DO something instead of these endless PR 'battles'.

andrewflnr 11y ago
In most companies currently offering minimum wage, raising wages to $15/hr without changing anything else would wreck the company immediately. They would likely have to do some combination of firing people who can't do $15/hr worth of work and raising prices and hope they still have a market after that. So no, it's not so easily "in their power". Further, a lot of companies aren't run by the "mega rich", but by regular people who are just trying to get by. These are not people you want to screw over.
- lumberjack 11y ago
  >In most companies currently offering minimum wage, raising wages to $15/hr without changing anything else would wreck the company immediately. In 2015 and with some data from IRS one could estimate the actual and not just speculative impact of raising the minimum wage. One could know exactly how many jobs will be lost and one does not need to speculate any more. Once one knows the exact impact it's easy to make the decision of exactly what the optimal minimum wage should be. Also, you seem to be alluding to small enterprises paying minimum wage. I highly doubt that. Small shops can exist only if they are doing something that is highly specialized/technical as the big competitors devour the rest of the general market. As such their employees are highly skilled and don't get paid minimum wage.
- heimatau 11y ago
  "So no, it's not so easily 'in their power'." Actually, it is. Not the utopia of minimum wage to 15hr. Let's do some quick numbers. 50 weeks a year, 35 hours a week. Equals 1,750 hours per year. Employers raise an employee pay by $1 an hour. Hmm. That's greater than most get from EITC. $3.5 an hour raise, and that's greater than ALL EITC recipients. Also, managers and top managers don't need their lofty salaries. That could change. Finally, I'd never propose an immediate change. There would be a lot of business structural change to rebuild the middle class. There are other ways to redistribute the money in a more fair way, than what is currently being done.

analog31 11y ago

In essence, the EITC rewards work and provides an incentive for workers to improve their skills. Equally important, it does not distort market forces, thereby maximizing employment. I wonder about this. In a perfect market system, it's impossible to pay below-subsistence wages, because you can't work if you've starved to death. I think Adam Smith pointed this out. So, any public support for wage earners distorts the market by driving wages downward. It's arguable that the government should subsidize wage earners, so that wages can be lower. Low wage earners receive a lot of things that they don't pay for out of their own pockets, such as education, which I support. But it should not be offered as a protection of the free market.

monochromatic 11y ago
> In a perfect market system, it's impossible to pay below-subsistence wages, because you can't work if you've starved to death. You might not starve to death if you start committing crimes on the side though.
- analog31 11y ago
  True, and it raises an additional point, which is that an isolated consideration of economics generally overlooks the willingness of people to cooperate with the myriad of written and unwritten rules that govern civil society.
lumberjack 11y ago
>I wonder about this. In a perfect market system, it's impossible to pay below-subsistence wages, because you can't work if you've starved to death. Exactly. It's no hard to see how those who praise it so much get to immediately benefit from it by being able to hire people for wages that are ridiculously low and forcing the taxpayer to foot the bill for the rest.
DalekBaldwin 11y ago
Any non-market action will distort market forces. What he means is that the EITC is a softer kind of distortion. Since the EITC is essentially a matching contribution to the employee's earnings, it still allows decisions about wages to be made at the margin, as opposed to a minimum wage which mandates a hard cutoff.

waps 11y ago

It's funny how this article is located right below an article pointing out how Warren Buffet owns trailor park firms who advertise that they are raising rent on poor people at 10% per year. They can't leave, after all, the alternative is to be homeless. [1] > No conspiracy lies behind this depressing fact: The poor are most definitely not poor because the rich are rich. However, a lot of people are homeless because Warren Buffet wanted to be paid just a little more. [1] http://www.theguardian.com/lifeandstyle/2015/may/03/owning-trailer-parks-mobile-home-university-investment http://www.theguardian.com/lifeandstyle/2015/may/03/owning-t...

lumberjack 11y ago

Yeah, let's subsidize Walmart employees with tax payer money instead of letting the poor guys pay their employees themselves. It's not like they are billionaires or anything. What should rather happen is the exact opposite! If you work for Walmart you shouldn't be able to receive any government assistance at all because you are already working and the point of working 8 hours a day is to be able to feed and cloth yourself and if you cannot do that with that job then that job is of no use to you or anyone and should therefore stop existing. But if it turns out that the employer or whoever benefits from that job desperately needs it, they will have to pay the employees a livable wage. What should definitely not happen is that the tax payer ends up subsidizing privately owned businesses without getting anything in return. And if it doesn't sit well with anyone that people get money for nothing (which is the argument pushed for EITC) then let the government employ them to do something that is at least remotely useful to the taxpayer that is footing the bill. Even just sweeping leafs off porches is better use of money.

Symmetry 11y ago
If you give workers higher wages using the minimum wage most of the extra money they get comes from the place they work raising prices. Places that pay minimum wage, like Walmart, disproportionately have customers that aren't very well off themselves. Giving money from a household that earns $40k per year to one that earns $20k per year does make the country more equal but we can do better. The money that goes into the EITC comes from income taxes and the top 10% of household pay more than half of the US income tax. If we want to give money to working Americans we have to pay for it somehow. We can either do that explicitly and in a progressive fashion or we can hide the price from voters and let the burden fall repressively.
- lumberjack 11y ago
  >If you give workers higher wages using the minimum wage most of the extra money they get comes from the place they work raising prices. Employers are bound by the market when they set their prices and don't get to choose their price at random on a whim. >The money that goes into the EITC comes from income taxes and the top 10% of household pay more than half of the US income tax. Yes but for the most part those are just the middle class. The plutocrats pay fuck all in taxes. I do not want an MD with a networth of $10M (sweat of his own brow) subsidizing a Walton (who inherited his fortune). I want the Walton to pay the actual cost of running his goddamn shop. Also frankly, I think minimum wage is besides the point. What should come back are strong sector wide unions like the ones that still exist in Scandinavia. The unions will take care to setup their own sector wide minimum wage and will be far more flexible in responding to the market and also the cost of living than the government can ever be.

PaulHoule 11y ago

Republicans like Means Testing because they know many people won't fill out the paperwork to get benefits and Congressional Democrats like it too because they are almost all lawyers and paperwork is the center of their universe. I don't like the idea of picking certain people as being "needier" than others because it is a moving target. For instance, you might say that families need it more because they are raising kids, but one of the most troubled segments of the population are poor young men; if these guys get on their feet they are going to be in a position to raise a family and do it right.

midnitewarrior 11y ago

Everybody complains that the poor don't pay taxes. If they raised the minimum wage, everybody else wouldn't be stuck paying the extra tax burden of the poor because they could pay it themselves. If any thing, we need to raise minimum wage and lower the Earned Income Tax Credit. The EITC was created by businesses lobbying the government to low wage earners a tax break in exchange for not raising the minimum wage. It has been disastrous to tax revenues and wages. Millions of Americans get to hear how they are not carrying their tax burden as well and then are attacked by the Republicans for living on government handouts.

shit_parade2 11y ago
This is a false narrative. The poor pay plenty in taxes and fees. Between sales tax, worker payroll, SS, medicare, and various mandated fees from health insurance to car insurance to additional transportation taxes and tolls, and a million other fees and restrictions, the poor stay poor in part because of perverse government requirements.
- midnitewarrior 11y ago
  Sorry, let me clarify, income taxes. Poor don't pay their share of income taxes.